Dollar weakness propels gold 1% higher

Gold prices climbed 1% on Tuesday, helped by a fall in the US Dollar (USD) and as China’s central bank added to its gold reserves for a second straight month, while the market awaited U.S. economic data to gauge the Federal Reserve’s policy path.

Spot gold was up 0.9% at $2,659.29 per ounce, as of 9:53 a.m. ET (1453 GMT). U.S. gold futures rose 1% to $2,673.00.

“The dollar is off its highs, which is helping gold,” said Daniel Pavilonis, senior market strategist at RJO Futures.

The US dollar index was close to a one-week low following a Washington Post report that suggested President-elect Donald Trump’s tariff policies will not be as aggressive as promised, which Trump later denied.

“The caveat is waiting for the new administration to take over…The outlook for stickier inflation is still prevalent, and that coupled with all of the external political issues going on is still keeping the precious metals markets elevated,” Pavilonis said.

Uncertainty surrounding the tariff policy in the run up to Trump’s inauguration on Jan. 20 has fuelled concerns about future moves in U.S. policy.

Investors have been pricing in a scenario where proposed tariffs could inflame U.S. inflation, limiting the Fed’s ability to cut rates and thereby pressuring gold.

While bullion is considered a hedge against inflation, high rates reduce the non-yielding asset’s appeal.

Traders await Friday’s U.S. jobs report for policy clues, along with job openings data due later in the day, ADP employment and the minutes from the Fed’s December meeting on Wednesday.

Meanwhile, China’s central bank added gold to its reserves in December for a second straight month, following a resumption in November after a six-month hiatus, official data showed.

“(China’s purchase is) a development likely to lend continued support to the precious metal’s price,” said Ricardo Evangelista, senior analyst at ActivTrades.

Spot silver gained 1.1% to $30.29 per ounce, platinum added 2.4% to $950.23 and palladium rose 0.6% to $925.57.